4.1.8.3 Public goods, private goods and quasi-public goods Flashcards
What are public goods?
public goods are goods that are non-rival and non-excludable.
explain the characteristics of a public goods?
they are non rival which means that when a good is consumed, it doesn’t reduce the amount available for others
.they are also no excludable which means that once the good is provided you can’t stop any benefitting from the good.
what some examples of public goods
E.g. benefiting from a street light doesn’t reduce the light available for others
Why do public goods lead to market failure?
A public good is often under-provided in a free market because its characteristics of non-rivalry and non-excludability mean there is an incentive not to pay. In a free market, firms may not provide the good as they have difficulty charging people for their use.
What are private goods?
it is goods that are rival and excludable.for example If you sell a bottle of coca-cola to one individual, others cannot consume it.
what are quasi public goods?
Quasi-public goods have characteristics of both private and public goods, including partial excludability and partial rivalry
What is the free rider problem?
this occurs when people can benefit from a good/service without paying anything towards it.
give an example of the free rider problem?
If someone builds a lighthouse, all sailors will benefit from its illumination, even if they don’t pay towards its upkeep.
What is the tragedy of the commons?
it refers to how individuals prioritise personal gain over the well-being of society.When resources are held in common, it means that no one owns the resource, but everyone can access it.
give an example of tragedy of commons ?
no one owns the air, but everyone can use it. This unlimited use leads to the negative externality of air pollution. This is a market failure that results from common access.
